Abu Saeed Khudri relates Allah’s Messenger (peace and blessings of Allah be to him) as saying: “Do not sell gold for gold, except like for like, and don’t increase something of it upon something; and don’t sell silver unless like for like, and don’t increase something of it upon something, and do not sell for ready money something to be given later.”
(Sahih Muslim)
With increase in the rate of interest, the margin of profit declines and the investor prefers to lend his money on interest rather than invest it in business and take the risk. Since in the modern industrial economy of large-scale enterprise capital has assumed immensely great importance, the capitalist has, therefore, managed to mould the whole system of production to suit his vested interests – the system in which there is always a “guaranteed gain” for him irrespective of the fact whether the business sinks or swims.
The Holy Messenger enjoins the believers not to eye upon the increase in money/wealth with the help of interest and not an increase through profit.
Selling a dinar or dirham for more dinars or dirhams is forbidden because the exchange of two homogeneous commodities having different number, size and value is unlawful as it carries within it the element of interest. In this case dinar should not be exchanged for dinar, but it may be exchanged for silver, and with the help of that silver gold may again be bought. This rule however does not apply to the currency notes as these are not homogeneous as their denominations are different from one another.